I think we agree 100% and your assessment is superior. When I read the Seeking Alpha write up, I agreed with only one point--ECIG is cheap at 10c based on what we can review in terms of financials and the anticipated revenues for 2014.
These lenders--the senior secured and senior convertible--provided the loans with the expectation to be paid back according to terms. You can judge this by the way the terms read. They are not interested in converting to equity, it makes no sense. The senior secured lender has absolutely no incentive to convert to equity because if the O/S blew up to 500 million shares, their conversion price is still 80c.
A more critical observation has to be made here and that is in re of the senior convertible lenders. This group converting would create a change of control. The S/Alpha author opined that a group of lenders might do this to force management's arm to sell the company but that is just fantasy. In reality, this group converting is a very poor strategy because its position is subordinated. You don't convert to a boatload of shares and tell management to sell itself in this case because there is a senior secured group who can force ECIG into BK and sell all of its assets to get their money back and leave nothing for equity. The secured group is not going to agree to convert because it'd get less shares than an unsecured group--makes no sense, right?
These groups want their money back--they borrowed money, too as you have astutely pointed out. We're not talking 1 million $$ here. We're talking 10's of millions...
The only one that was intended to convert converted, and that was a planned dilution to adjust warrants.
AI
